Desire Petroleum hit by another well disappointment in the Falklands

Shares in Desire Petroleum (LON:DES) slumped this morning on news that the final well in the company's current drilling campaign in the Falkland Islands had failed to turn up anything meaningful for investors. Drilling has been under way on the Ninky prospect since the end of March and while oil shows were apparent during the process, the well is now set to be plugged and abandoned after failing to make a discovery. Desire now has around $37m to fund is share of the rig costs and a 3D seismic survey that is currently being undertaken over its licence acreage. However, it has no cash left for any more wells - having now drilled six in last 12 months - meaning that it will have to raise more money if it wants to rejoin the drilling campaign. The Desire Petroleum share price fell by nearly 60% to 16.5p. The 14/15-3 well on the Ninky prospect reached a total depth of 2,620 metres in the Barremian source rock interval. Based on drilling and wireline logging, the well encountered two sand-prone sections in the Upper and Middle F2 intervals, which were the primary targets. The sands have a combined gross thickness of 35 metres and oil shows were encountered throughout both intervals while drilling. The reservoir quality is generally poor having only 5.6 metres of net reservoir with an average porosity of 13%. A thin interval of around 1.2 metres at the top of the Middle F2 zone is interpreted to be oil bearing from log analysis. Desire said that wireline formation pressure measurements were attempted, but no valid pressures were obtained, indicating that the reservoirs are low permeability at the location. As a result no wireline sampling was attempted. The depositional model suggests these sands are sourced from the east and therefore better reservoir quality may be expected downdip. In addition, there are indications from seismic of further sands along strike on the Ninky structural high, which were not penetrated in this well. Desire is now planning to evaluate these opportunities with the new 3D seismic as part of its prospect inventory update. Desire and its partner in the Falklands, Rockhopper (LON:RKH) , are currently carrying out 3D seismic operations with the Polarcus Nadia. To date, approximately 1,485 sq km of data have been acquired in the Desire operated part of the programme. The company is anticipating that a further 195 sq km will be acquired to complete the operated programme. The joint survey is expected to be completed during May. Desire said that processing of the new seismic data is in progress and initial indications are that the data quality is good. Priority areas have been identified in the East Flank play between Ninky and Sea Lion, and over the Ann/Orca South prospect. The processed data from these priority areas is expected to be available in July. The full, merged data will be available later in the year, which will provide coverage over the southern part of the East Flank play and the Helen prospect. Desire said it remained optimistic that existing prospects could be significantly de-risked using the new seismic data and that new prospects would be identified, particularly within the East Flank play which is widely developed within the Desire operated licences. Stephen Phipps, Desire's chairman, said: "On completion of the Ninky well Desire will have funds of circa $37 million which, while more than adequate for our share of rig and vessel demobilisation, completion of our 3D seismic acquisition, processing and interpretation plus general working capital needs, is insufficient to drill further wells. Given our continuing confidence that oil will be discovered on Desire's acreage, further wells will need to be drilled and, therefore, once the results of the Ninky well and the 3D seismic have been analysed, we will review all financing options available with the intention of rejoining the drilling campaign later in the year if possible."